November 19, 2019

November 19, 2019

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November 18, 2019

Subscribe to Latest Legal News and Analysis

Institutional Investor Advocacy Group Proposes Limits to Multi-Class Voting by Delaware Companies

The Council of Institutional Investors (CII), an investor advocacy association primarily for pension funds and local governments, has put forth a proposal to amend the Delaware General Corporation Law to limit the ability of publicly-traded Delaware corporations to maintain multi-class common stock voting structures (i.e., high-vote/low-vote stock structures).

In summary, CII is proposing that a multi-class voting structure sunset no later than seven years after an IPO, a shareholder adoption or an extension vote approved by a vote of a majority of outstanding shares of each class, voting separately. CII’s seven-year sunset period is intended to recognize multi-class voting could have short-term benefits in certain circumstances, without what they consider “long-lasting unaccountability.”

While not new, multi-class voting structures have gained increased attention in recent years as a series of founder-led “unicorn” technology companies have gone public with high-vote/low-vote (or no-vote) structures. High-vote shares held by WeWork co-founder Adam Neumann were cited among other investor concerns around the company’s now-delayed planned IPO.

CII had previously, in October 2018, petitioned the New York Stock Exchange and NASDAQ to adopt similar limitations. Whether this proposal will gain traction with other investors or Delaware lawmakers is yet to be seen.

CII’s full proposal is available here.

©2019 Katten Muchin Rosenman LLP

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Mark Reyes Securities Lawyer Katten Muchin law firm Chicago office
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Mark J. Reyes concentrates his practice in corporate and securities matters, including representing issuers and investors in public offerings and private placements of equity and debt securities and advising clients in complex corporate transactions such as mergers, acquisitions, private investments in public equity (PIPEs), private equity investments and joint ventures. He also counsels public companies on securities law compliance, disclosures and corporate governance matters.

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Mark D. Wood, corporate securities lawyer Katten Muchin Chicago Law firm
Partner

Mark D. Wood is head of Katten's Securities practice and concentrates in corporate and securities law. Mark represents public companies, issuers and investment banks in initial public offerings (IPOs) and other public offerings, private investment in public equity (PIPE) transactions, debt securities and other securities matters.

Mark also represents clients in complex corporate transactions, including tender offers, mergers, acquisitions, dispositions, going-private transactions, private equity investments, joint ventures and strategic alliances.  He is a leading practitioner in representing investors, public companies and placement agencies in private investment in public equity (PIPE) transactions. In addition, he also counsels public companies on securities law compliance, disclosures, corporate governance and compensation-related issues. Many of his clients are middle market and upper middle market companies in the technology, oil and gas, manufacturing, health care and commercial banking industries.

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Brian Hecht Corporate Lawyer Katten
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Brian Hecht is a Corporate partner in Katten's New York office. He offers broad transactional experience in capital markets transactions, mergers and acquisitions and corporate governance matters. Within capital markets, Brian's practice focuses on initial public offerings, high yield offerings, spin-offs, tender offers and investment grade debt offerings. Within mergers and acquisitions, he represents private equity funds and public companies in both public and private acquisitions and divestitures.

Prior to joining Katten, Brian was a...

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